Ari Weinberg writes consistently interesting stories about the world of ETFs. In a recent piece in Pensions & Investments (you can see it here if you happen to be a P&I Daily subscriber) he said, “The poster child for being in the right place at the right time in 2013 has been the $11.1 billion WisdomTree Japan Hedged Equity Fund with net flows of $9.3 billion through October, ranking it second only to SDR S&P 500 ETF.”
There are all manner of ETFs out there and many will never be poster child for a month, to say anything of a year.
But the WisdomTree offering (DXJ) was perfectly suited for a moment in time, when Japan decided to try to win the stimulus race and its market went up relentlessly. Of course, as we’ve covered before, the yen went the other way, which is why the “Hedged” part of the fund name proved to be so irresistible.
The chart shows the performance of DXJ since its inception, with the S&P 500 provided for comparison. It’s lagged quite a bit, but not during the magical period of time between the vertical lines, when it was up 71% against a mere 22% from the S&P.
In response, the assets flooded in (careful observers will note an age-old pattern). How much of this hot money will be in the poster child’s pockets in a year or two? That’s a good question. (Chart: Bloomberg terminal.)
The latest essay throws darts at the notion that an investment process that is consistent and repeatable is the Holy Grail for asset managers. In fact, it can be a trap.
Funny, today I read an industry piece by the head of a fund company on the selection of subadvisors which said that “each asset manager under consideration should be able to demonstrate a consistent and repeatable investment process.” I’d like to see that demonstration and have the chance to ask a few questions.